1
EXHIBIT 10.8
FORM OF FINANCIAL CONSULTING AGREEMENT
BETWEEN REPRESENTATIVE AND THE COMPANY
March 31, 1997
Conserver Corporation of America
0000 XxXxxxx Xxxx
Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Chairman of the Board
Gentlemen:
Reference is made to our recent discussions relating to a proposed
public offering of securities of Conserver Corporation of America (the
"Company") through Xxxxxxx/Xxxxxx Associates, L.P. (the "Underwriter"). Based
upon our discussions, financial material which you have submitted to us and
representations which you have made to us describing the Company and its
principals, and subject to (i) the satisfactory completion of our due diligence
review of the Company's business and future plans; (ii) the future business and
financial condition of the Company; (iii) economic and market conditions in
general, we hereby confirm our agreement in principle to act as underwriter for
the Company, on a firm commitment basis, in connection with a public offering of
the Company's securities (the "Offering") upon the following basic terms and
conditions:
1. The offering shall consist of the sale by the Company of
approximately $11,220,000 of the Company's securities. It is currently
anticipated that the Offering will consist of the sale by the Company of
approximately 2,200,000 shares (the "Shares") of the Company's Common Stock par
value $.001 per share (the "Common Stock") (plus 330,000 additional Shares to
cover over-allotments) at an anticipated offering price of approximately $5.00
per Share and 2,200,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") (plus 330,000 additional Warrants to cover over-allotments) at an
anticipated offering price of approximately $0.10 per Warrant. Each Warrant will
entitle the holder to purchase, during an exercise period commencing on the date
of issuance and terminating five years after the effective date (the "Effective
Date") of the Registration Statement (as described below), one share of Common
Stock at an exercise price of $7.00 per share, subject to adjustment to prevent
dilution. The Warrants shall be redeemable at the option of the Company
commencing one year after issuance, for $.10 per Warrant, on thirty days prior
written
2
notice, provided the closing bid price of the Company's Common Stock is at least
$12.00 for 20 consecutive trading days ending within ten days of the date of
the notice of redemption. The Shares and Warrants are hereinafter collectively
referred to as the "Securities."
2. The actual size of the Offering, the precise number of Shares and
Warrants to be offered, and the offering price per Share and Warrant shall be
negotiated between the Company and the Underwriter and will depend upon the
capitalization of the Company at the time of the Offering, market for the
Company's Common Stock, general economic conditions and changes in the
prospects or forecasts of the Company, as well as other factors. The Company
will have no more than 5,130,000 shares of Common Stock outstanding, on a fully
diluted basis, immediately prior to the effective date of the Registration
Statement (as described below), excluding shares underlying outstanding
derivative securities exercisable or convertible at a price no less than the
initial public offering price of the Common Stock and up to 1,300,000 shares of
Common Stock reserved for issuance under the Company's 1996 Stock Option plan
(the "Plan"). The Plan shall provide that no options will be exercisable or
shares issued, for consideration less than the closing bid price on the date of
issuance and in no event prior to or immediately following the Offering at an
exercise price less than $5.00 per share. In addition, no more than 605,000
options may be granted between the date hereof and the effective date.
3. The Company will grant to the Underwriter an option, exercisable
within 45 days after the Offering is commenced, to acquire up to an additional
15% of the number of Securities to be offered, solely for the purpose of
covering over allotments (the "Over Allotment Option") on the same terms as the
Securities are initially offered to the public.
4. The underwriting discount or spread shall be 10% of the public
offering price. The Underwriter shall also be entitled to a nonaccountable
expense allowance equal to 3% of the gross proceeds of the Offering (including
proceeds from the sale of Securities subject to the Over Allotment option
referred to in paragraph 3 hereof). The Company shall pay a $50,000 advance to
the Underwriter which shall be applied against the nonaccountable expense
allowance. Such sum shall be paid upon execution of this letter of Intent.
5. The Company shall, as soon as practicable, prepare and file with the
Securities and Exchange Commission (the "Commission") and the appropriate state
securities authorities, an amendment to the Registration Statement on Form S-1
or other appropriate form (the "Registration Statement") under the Securities
Act of 1933, as
2
3
Securities to be sold in the Offering (including the Securities subject to the
Over allotment Option referred to in paragraph 3 hereof) with the Commission
and the filing of the offering materials with the NASD, all fees, expenses and
disbursements relating to the registration or qualification of such Securities
under the securities laws of such states and other jurisdictions as the
Underwriter may reasonably designate (including, without limitation, all filing
and registration fees and fees and disbursements of the Underwriter's counsel),
Underwriter's counsel fees in connection with obtaining clearance from the
NASD, the costs of all mailing and printing of the underwriting documents
(including the Underwriting Agreement, any Blue Sky Surveys and, if
appropriate, any Agreement Among Underwriters, Selected Dealers Agreement,
Underwriters' Questionnaire and Power of Attorney), Registration Statements and
all amendments, supplements and exhibits thereto and as many preliminary and
final prospectuses as the Underwriter may reasonably deem necessary, the costs
of one tombstone advertisement, all reasonable travel and lodging expenses
incurred by the Underwriter and its counsel, reasonable bound volumes and
prospectus memorabilia. Upon the Underwriter's request, the Company shall
provide funds to pay all such fees, expenses and disbursements in advance. The
Company agrees to use a financial printer located in New York City acceptable
to the Underwriter.
9. While the Commission is reviewing the Registration Statement, the
Underwriter may plan and arrange a marketing trip/reception for the Company's
management to meet with prospective investors. Such a trip may include visits
to a number of prospective institutional and retail investors. On such
trips/receptions, the Company will pay all reasonable expenses.
Conferences and discussions between the Company and the Underwriter
shall be held as required within the City of New York in the State of New York.
If meetings shall be held outside of these areas and should the Underwriter be
required to incur special travel expenses in connection with such meetings and
the proposed public offering, the Company agrees to pay such reasonable amount
of traveling and lodging out-of-pocket expenses as may be necessarily incurred
by the Underwriter or its counsel, payable when incurred and billed.
10. At such time as the Company and the Underwriter are mutually
satisfied that it is appropriate to commence the Offering, the final terms of
the Underwriting Agreement will be negotiated and the Company and the
Underwriter will request the Commission to declare the Registration Statement
effective.
11. Concurrent with the closing of the Offering, the Company shall sell
to the Underwriter (or its designated affiliates) Underwriter's Warrants (the
"Underwriter's Warrants") covering a
4
4
amended (the "Act"), covering the Securities to be sold in the Offering
(including the Securities subject to the Over allotment Option referred to in
paragraph 3 hereof). The Registration Statement, and all amendments and
supplements thereto, will be in form satisfactory to the Underwriter and its
counsel and will contain audited financial statements and such other financial
statements and schedules as may be required by the Act and the rules and
regulations of the Commission thereunder. The Underwriter shall be given the
opportunity to make such review and investigation in connection with the
Registration Statement as it deems desirable.
The Company shall pay, as incurred, all expenses of such investigation
including all expenses associated with a trip by the Underwriter including
reasonable travel and lodging expenses of the Underwriter and its
representatives, not to exceed $25,000, to examine the Company's facilities and
the fees and expenses of an independent consultant to evaluate the Company's
products and prepare a due diligence report to the Underwriter.
6. The Registration Statement filing will include as an exhibit a proposed
form of Underwriting Agreement. The final Underwriting Agreement will be in form
satisfactory to the Company and the Underwriter and will include indemnification
provisions and other terms and conditions customarily found in underwriting
agreements. Without limiting the generality of the foregoing, the Underwriting
Agreement shall provide that for a period of (i) 27 months from the Effective
Date, with respect to any officer or director (ii) 24 months from the Effective
Date with respect to Xxxxxx Agronoff and SES Limited (iii) 18 months with
respect to all persons to receive additional shares prior to the Offering and
(iii) 12 months with respect to the Company and all other shareholders of the
Company, no such person shall offer, issue, sell, contract to sell, grant any
option for the sale of or otherwise dispose of any securities of the Company
without the Underwriter's prior written consent, except for Securities issued
pursuant to the Over Allotment option referred to in paragraph 3 hereof. The
Underwriter's consent shall not be unreasonably withheld with respect to sales
of securities by the Company.
7. Concurrently with, or as soon as practicable after, the filing of the
Registration Statement with the Commission, the necessary state securities law
filings will be made with respect to the Securities to be sold in the Offering
(including the Securities and underlying securities subject to the Over
allotment Option referred to in paragraph 3 hereof). The Company and the
Underwriter will cooperate in obtaining the necessary approvals and
qualifications in such states as the Underwriter deems desirable.
8. The Company shall be responsible for and pay all expenses relating to
the Offering, including, without limitation, all filing fees and communication
expenses relating to the registration of the
3
5
number of Securities equal to 10% of the number of Securities being sold in the
Offering (not including any Securities subject to the Over allotment option
referred to in paragraph 3 hereof). The price of the Underwriter's Warrants
shall be $.001 per Warrant. The Underwriter's Warrants will be nonexercisable
for one year after the date the offering commences and will expire five years
after such date. The Underwriter's Warrants will be exercisable at a price equal
to 120% of the public offering price. The Company agrees that it will, on one
occasion during the four-year period commencing one year from the Effective
Date, file a registration statement with the Commission upon the request of the
Underwriter at the Company's expense which registration statement shall include
the shares of the Company's Common Stock and Warrants underlying the
Underwriter's Warrants, and the shares of Common Stock underlying the Warrants
underlying the Underwriter's Warrants at the Company's expense (other than
underwriting discounts and commissions and fees of counsel to the holders of the
Underwriter's Warrants, Shares and Warrants so registered). The Underwriter
shall also have the right, during such four-year period, to require the Company
to prepare and file one additional registration statement at the Underwriter's
sole expense. The holders of the Underwriter's Warrants may demand registration
without exercising the Underwriter's Warrants and, in fact, are never required
to exercise same. In addition, the Company has also agreed, to provide to the
Underwriter "piggyback" registration rights covering the shares of the Company's
Common Stock underlying the Warrants. The Warrants will be nontransferable for a
period of one year (other than to a successor in merger or consolidation, to a
purchaser of substantially all of the Underwriters assets, to its partners in
the event of liquidation or dissolution or to its officers or employees or to a
member participating in the Offering and the officers or employees thereof), may
be exercised as to all or a lesser number of Shares and/or Warrants. The
Underwriter's Warrants will contain provisions covering cashless exercise and
adjustment in the number and price of such Warrants or Shares to prevent
dilution.
12. The Company shall, at its cost and expense, take all necessary and
appropriate action to cause the Securities to be included for trading on the
Nasdaq Stock Market immediately upon the effective date of the Registration
Statement, and remain listed for at least five years provided the Company
otherwise complies with the prevailing requirements for such listing.
13. The Company will use its best efforts to obtain key person life
insurance in the amount of $2,000,000 on the life of one or more of the
Company's principal executive officers designated by the Underwriter. Such
insurance shall be maintained in full force and effect for a period of three
years.
5
6
14. The Company shall also use its best efforts (which shall include,
but shall not be limited to, the solicitation of proxies, if necessary) to
elect a designee of the Underwriter to the Company's Board of Directors. In the
alternative, the Underwriter shall be entitled to designate a senior advisor who
shall be invited to, and be entitled to attend, all meetings of the Board of
Directors. Such designee or senior advisor shall receive such compensation as
shall be appropriate for an outside director. The Company shall also use its
best efforts to obtain Directors and Officers' liability insurance in the face
amount of at least $1,000,000.
15. The Company and the Underwriter represent that no person has acted
as a finder in connection with the transactions contemplated herein and the
Underwriter and the Company agree to indemnify each other with respect to any
claim for a finder's fee in connection with the Offering. The Company shall
obtain the unconditional release of National Securities Corporation as soon as
practicable but no later than the filing of the amendment to the Registration
Statement.
16. Upon conclusion of the Offering, the Company will engage a
financial public relations firm designated by the Underwriter and reasonably
acceptable to the Company to provide corporate communications services.
The Company agrees and undertakes to consult with the Underwriter prior
to distribution to third parties of any financial information, news releases,
and/or other publicity regarding the Company, its business, or any terms of the
proposed offering.
Copies of all documents, which the Company or its public relations
advisors intend to distribute will be provided to the Underwriter for review
prior to such distribution which the Underwriter will hold in confidence until
the public release of such information.
17. The Company agrees to designate American Stock Transfer & Trust
Company as transfer agent for the Company. For a period of two (2) years from
the Effective Date of the Registration, the Company, at its expense, shall
provide the Underwriter with copies of the Company's daily transfer sheets.
18. The Company agrees that if the Securities are sold pursuant to the
Offering, the Underwriter shall have an irrevocable preferential right for a
period of three (3) years from the date the Offering is completed to purchase
for its account or to sell for the account of the Company, or any subsidiary of
or successor to the Company, or any of its officers, directors, or affiliates,
determines as of the Effective Date (the "Principal Stockholders") any
securities of the Company (excluding offerings solely consisting of debt) which
the Company or any of its Principal
6
7
Stockholders may seek to sell, whether pursuant to registration under the Act
or otherwise. The Company and its Principal Stockholders will consult the
Underwriter with regard to any such offering and will offer the Underwriter the
opportunity to purchase or sell any such securities on terms not more favorable
to the Company or its Principal Stockholders than it or they can secure
elsewhere. If the Underwriter fails to accept such offer within twenty (20)
business days after the mailing of a notice containing such offer by registered
mail addressed to the Underwriter, then the Underwriter shall have no further
claim or right with respect to the financing proposal contained in such notice.
If, however, any of the material terms of such proposal are subsequently
modified, the preferential right referred to herein shall apply to such
modified proposal as if the original proposal had not been made. The
Underwriter's failure to exercise its preferential right with respect to any
particular proposal shall not affect its preferential rights relative to future
proposals.
19. At or prior to the closing of the Offering, the Company will enter
into an agreement with the Underwriter pursuant to which (i) the Company shall
agree to employ the Underwriter as its Investment Banker and Financial
Consultant at a monthly fee of $5,000.00 per month for a period of three years
(exclusive of any accountable out-of-pocket expenses) payable in monthly
installments commencing on the closing date of the Offering; (ii) for a period
of five years, the Underwriter will be paid a fee equal to five percent of the
amount up to $5 million and two and one half percent of the excess, if any,
over $5 million of the consideration involved in any transaction (including
mergers, acquisitions, joint ventures and other business transactions)
consummated by the Company with a party introduced to the Company by the
Underwriter.
20. No proceeds of the Offering will be used to pay outstanding loans
from officers, directors or shareholders or to pay any accrued salaries or
bonuses to any employees or former employees.
21. If, at any time prior to the signing of the Underwriting Agreement
or the closing, as the case may be, (i) the Company will not or cannot
expeditiously proceed with the Offering, including without limitation as a
result of the Company taking or not taking actions, or (ii) any of the
representations, warranties or covenants of the Company herein are not
materially correct or cannot be complied with, or (iii) in the Underwriter's
sole judgement, there occurs a material adverse change in the Company's
financial condition, business, prospects or obligations, and the Underwriter
shall not commence or continue the underwriting, or (iv) in the Underwriter's
sole judgment, market conditions are unsuitable for the Offering and the
Underwriter shall not commence or continue the underwriting, the Company shall
reimburse the Underwriter in full for its actual out-of-pocket expenses
(including, without limitation, its legal fees and disbursements)
7
8
up to $100,000.
Except as provided in this paragraph, this letter is not intended to be
a binding legal document, as the agreement between the parties hereto on these
matters will be embodied in the Underwriting Agreement referred to above. Until
the Underwriting Agreement has been finally negotiated and signed, either the
Company or the Underwriter may at any time terminate further participation in
the proposed transactions. The party so terminating shall have no liability to
the other on account of any matters provided for herein, except that,
regardless of which party elects to terminate, the Company agrees to reimburse
the Underwriter for, or otherwise pay and bear, the expenses and fees to be
paid and borne by the Company as provided herein. Until the consummation of the
Offering and as long as the Underwriter is proceeding in good faith with
preparations for the Offering, the Company agrees not to negotiate or enter
into any agreement with or solicit any underwriter, potential underwriter, or
other person in connection with a public offering of the Company's securities.
We are delighted at the prospect of working with you and look forward
to a successful offering.
If you are in agreement with the foregoing, please execute and return
two copies of this letter to the undersigned.
Very truly yours,
Xxxxxxx/Xxxxxx Associates, L.P.
By ___________________________________
Xxxxx Xxxxxx
Vice-President
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST ABOVE WRITTEN:
Conserver Corporation of America
By _____________________________
Xxxxxxx X. Xxxxx
Chairman of the Board
8
